Hi @Juliette9. It's a pity guests didn't read the description properly. On the other hand, given that they want a full refund plus 'compensation' (what do they mean by that?), they might be trying to scam you.
Whatever you do, make sure the guests themselves cancel the reservation, otherwise you will be penalised. They need to take up the matter with AirBnB. After all, they're the ones who made the mistake in booking. Once they've cancelled, at least those days will be freed up (though I suppose no one will book at this late date).
For the future, I'd suggest you change your cancellation policy from flexible to moderate or strict. You should also require a Security Deposit. In addition to that, create a clear and firm set of House Rules.
You might also want to emphasise in your description that the guest accommodation is not the whole whole house but simply a suite of two rooms and a bathroom, with breakfast provided.